UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
11-K
þ Annual Report Pursuant
to Section 15(d) of the Securities
Exchange
Act of 1934
For the
fiscal year ended December 31, 2009
OR
¨ Transition Report
Pursuant to Section 15(d) of the Securities
Exchange
Act of 1934
Commission
file number: 000-03676
A. Full
title of the plan and the address of the plan, if different from that of the
issuer named
below:
VSE
CORPORATION
EMPLOYEE
ESOP
B. Name
of issuer of the securities held pursuant to the plan and the address of its
principal executive office:
VSE
Corporation
2550
Huntington Avenue
Alexandria,
Virginia 22303
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the trustees have
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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VSE
CORPORATION
EMPLOYEE
ESOP
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By:
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/s/
Thomas M. Kiernan
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Thomas
M. Kiernan
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Vice
President, General Counsel
and
Corporate Secretary
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VSE
CORPORATION EMPLOYEE ESOP
Financial
Statements and Supplemental Schedule
December
31, 2009 and 2008
Contents
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Page
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Financial
Statements
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3
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4
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5
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Supplemental
Schedule
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14
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VSE Corporation Employee ESOP
Statements
of Net Assets Available for Benefits
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December
31, |
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December
31, |
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2009
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2008
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Cash
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$ |
152,803 |
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$ |
169,891 |
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Investments
- at fair value
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2,455,733 |
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3,744,464 |
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Net
assets available for benefits
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$ |
2,608,536 |
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$ |
3,914,355 |
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See
accompanying notes.
VSE Corporation Employee ESOP
Statement
of Changes in Net Assets Available for Benefits
Year
Ended December 31, 2009
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Additions
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Interest
and dividends
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$ |
14,733 |
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Deductions
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Net
depreciation in fair value of investments
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77,105 |
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Benefits
paid to participants
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1,243,447 |
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Total
deductions
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1,320,552 |
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Net
change
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(1,305,819 |
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Net
assets available for benefits
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Beginning
of year
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3,914,355 |
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End
of year
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$ |
2,608,536 |
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See
accompanying notes.
VSE Corporation Employee
ESOP
Notes
to Financial Statements
December 31,
2009 and 2008
1.
Description of the Plan
The VSE
Corporation Employee ESOP/401(k) Plan (the Plan) was adopted by the Board of
Directors of VSE Corporation (the Company or Plan Sponsor) in 1984. The Plan was
a defined contribution plan with an Employee Stock Ownership Plan (ESOP)
component covering all full-time and part-time employees of the Company and a
401(k) component covering all full-time and part-time employees of the Company
and its wholly owned subsidiaries. All assets were held in the VSE Corporation
Employee ESOP/401(k) Plan Trust. The Plan was subject to the
applicable provisions of the Employee Retirement Income Security Act of 1974
(ERISA), as amended.
Effective
January 1, 2008 the VSE Corporation
Employee ESOP/401(k) Plan was amended and restated to remove the Internal
Revenue Code (Code) section 401(k) feature from the Plan and rename the Plan as
the VSE
Corporation Employee ESOP. As of January 1, 2008, the Plan has
invested primarily in common stock of VSE Corporation and is intended to be
solely an “Employee Stock Ownership Plan” as defined in Section 4975(e) (7) of
the code. The assets related to the 401(k) feature of the Plan were transferred
to the VSE Corporation 401(k) Plan effective January 1, 2008. The Plan is
subject to the applicable provisions of the Employee Retirement Income Security
Act of 1974 (ERISA), as amended.
Certain
officers or employees of the Company serve as Trustees of the Plan (ESOP
Trustees). The Plan is administered in-house by the Company.
An
eligible employee, as defined in the Plan document, becomes eligible to
participate in the Plan on the first day of the month following the date of
hire. If the eligible employee’s first day of employment falls on the first
calendar day of the month (or on the first regular working day of the month),
the eligible employee will immediately be eligible to participate in the Plan.
As a result of the Plan’s termination, no additional employees were eligible to
become participants in the Plan for Plan years beginning after December 31,
2007.
VSE
Corporation Employee ESOP
Notes
to Financial Statements (continued)
1.
Description of the Plan (continued)
Contributions
Prior to
March 31, 1999, the Company could elect to make a contribution to the Plan
principally for the purchase of Company stock. The contribution was made on
behalf of each participant based upon a percentage of each participant’s
compensation in the plan year or other uniform formula, as defined by the Plan.
This contribution was allocated to each participant’s account on the last day of
the Plan year. The Company stock is held by the Plan for the participants and
each participant is entitled to certain stockholder rights. Each participant who
has had VSE Corporation Common Stock (par value $.05 per share) (VSE Stock)
allocated to his or her participant Payroll-Based Stock Ownership Plan (PAYSOP)
or ESOP account is entitled to exercise voting rights attributable to his or her
account and is notified by the ESOP Trustees prior to the time that such rights
are to be exercised. If participants with stock in the PAYSOP and/or ESOP fail
to exercise their voting rights, the ESOP Trustees will vote this stock. The
ESOP Trustees also vote the VSE Stock held by the Plan’s VSE Stock Fund as well
as all unallocated shares of VSE Stock. No contributions have been made to the
PAYSOP since 1986.
Effective
December 31, 2007, the Board of Directors of VSE Corporation terminated the
Plan. Accordingly, no additional contributions shall be made to the
Plan for plan years beginning after December 31, 2007.
Dividends
received on VSE Stock held in participant accounts and nonparticipant directed
investments are allocated pro rata to such participant and nonparticipant
accounts.
Distributions
Participants
(or their beneficiaries) were eligible to receive ESOP benefits upon plan
termination, retirement, disability, termination of employment, or
death. Benefits were usually distributed in a lump sum. Distributions of VSE
Stock are typically made in shares of VSE Stock. Fractional shares of VSE Stock
and distributions fewer than 100 shares are paid in cash.
Ownership
Rights (Vesting)
Participants
are 100% vested in their PAYSOP contributions. ESOP contributions were subject
to the following graded vesting schedule: 25% after one year of
service, 50% after two years of service, and 100% after three years of
service. To earn a “year of service,” a participant must have worked
1,000 hours or more in a calendar year. However, each participant became fully
vested in their ESOP contributions upon plan termination.
VSE
Corporation Employee ESOP
Notes
to Financial Statements (continued)
1.
Description of the Plan (continued)
Effective
December 31, 2007, the Board of Directors of VSE Corporation terminated the ESOP
portion of the Plan. Due to the termination, the Corporation
authorized the Trustees to distribute the vested assets of the ESOP to the
Plan’s participants and beneficiaries pursuant to the terms of the
Plan. Each participant became fully
vested in amounts held within the Plan for the participant’s
benefit.
2.
Summary of Significant Accounting Policies
The
accompanying financial statements are prepared on the accrual basis of
accounting.
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles, requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates and assumptions.
The
direct administrative expenses of the Plan for the year ended December 31, 2009
and 2008 of approximately $8 thousand and $61 thousand, respectively, were paid
by the Company.
Benefit
Payments
Benefits
are recorded when paid.
VSE
Corporation Employee ESOP
Notes
to Financial Statements (continued)
3. Fair
Value Measurement
Financial
Accounting Standards Board (FASB) Accounting Standards Codification
ASC 820, Fair Value Measurements and Disclosures, provides the framework
for measuring fair value. That framework provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (level 1
measurements) and the lowest priority to unobservable inputs (level 3
measurements). The three levels of the fair value hierarchy are as
described below:
| Level
1 |
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Inputs to
valuation methodology are unadjusted quoted prices for identical assets or
liabilities in active markets that the Plan has the ability to
access. |
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| Level
2 |
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Inputs to the
valuation methodology include: |
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quoted
prices for similar assets or liabilities in active
markets; |
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quoted
prices for identical or similar assets in markets that are not
active; |
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inputs
other than quoted prices that are observable for the asset or
liability; |
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inputs
that are derived principally from or corroborated by observable market
data by correlation or other means. |
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If
the asset or liability has a specified (contractual) term, the Level 2
input must be
observable for substantially the full term of the asset or
liability. |
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| Level
3 |
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Inputs to the
valuation methodology are unobservable and significant to the fair value
measurement. |
The
asset’s or liability’s fair value measurement level within the fair value
hierarchy is based on the lowest
level of any input that is significant to the fair
value measurement. Valuation techniques used need to maximize the use of
observable inputs and minimize the use of unobservable inputs.
Following
is a description of the valuation methodologies used for assets measured at fair
value. There have been no changes in the methodologies used at
December 31, 2009 and 2008.
VSE
Corporation Employee ESOP
Notes
to Financial Statements (continued)
3. Fair
Value Measurement (continued)
Common
Stock: Valued at the closing price reported on the active market on which
the individual securities were traded.
The
methods described above may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values.
Furthermore, while the Plan believes its valuation methods are appropriate
and consistent with other market participants, the use of different
methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at the reporting
date.
The
following table sets forth by level, within the fair value hierarchy, the Plan’s
assets at fair value as of December 31, 2009 and 2008:
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Level 1
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Level 2
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Level 3
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December
31, 2009:
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Common
stock
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$ |
2,455,733 |
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$ |
- |
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$ |
- |
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December
31, 2008:
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Common
stock
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$ |
3,744,464 |
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$ |
- |
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$ |
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Investments
in VSE Corporation stock are valued at fair market value based on quoted market
prices. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. See note 3 for discussion of fair value
measurements. Purchases and sales of securities are recorded on a trade-date
basis. Interest income is recorded on an accrual basis. Dividends are recorded
on the ex-dividend date. VSE Stock is purchased in the over-the-counter market
or from stockholders. Dividends on VSE Stock are reinvested at fair market
value. Net appreciation (depreciation) includes the Plan’s gains and losses on
investments bought and sold as well as held during the year.
VSE
Corporation Employee ESOP
Notes
to Financial Statements (continued)
4.
Investments (continued)
The fair
value of individual investments that represent 5% or more of the Plan’s net
assets available for benefits are as follows:
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December
31,
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2009
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2008
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VSE
Stock
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54,475
and 95,449 shares, respectively
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$ |
2,455,733 |
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$ |
3,744,464 |
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The
Plan’s investment in VSE Stock is presented in the following table:
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December
31,
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2009
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2008
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Number
of shares
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54,475 |
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95,449 |
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Cost
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$ |
129,221 |
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$ |
246,991 |
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Market
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$ |
2,455,733 |
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$ |
3,744,464 |
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Nonparticipant-Directed
Investments
Nonparticipant-directed
investments, held in the Plan as of December 31, 2009 and 2008, consisted
entirely of VSE Stock. These net assets and changes are as follows:
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December
31,
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2009
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2008
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Market
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$ |
2,455,733 |
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$ |
3,744,464 |
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Year
ended
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December
31,
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2009
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Changes
in net assets:
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Net
realized and unrealized loss on VSE Stock
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$ |
(77,105 |
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Distributions
to participants
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(1,211,262 |
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$ |
(1,288,367 |
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During
2009, the Plan’s investments (including gains and losses on investments bought
and sold, as well as investments held during the year) depreciated in value as a
result of net changes in the market values of VSE Stock by
$77,105.
VSE
Corporation Employee ESOP
Notes
to Financial Statements (continued)
4.
Investments (continued)
Reportable
transactions
The Plan
reports each transaction or series of transactions involving the purchase or
sale of assets exceeding five percent of Plan assets as of the beginning of the
plan year. There were no reportable transactions for the plan year
ended December 31, 2009.
5.
Differences between Financial Statements and Form 5500
In
accordance with U.S. generally accepted accounting principles, amounts allocated
to withdrawing participants’ accounts are not reported as liabilities on the
Statements of Net Assets Available for Benefits. The following is a
reconciliation of net assets available for benefits per the financial statements
to IRS Form 5500 (Annual Return/Report of Employee Benefit Plan):
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December
31,
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2009
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2008
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Net
assets available for benefits per the financial Statements
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$ |
2,608,536 |
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$ |
3,914,355 |
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Amounts
allocated to withdrawing participants
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(165 |
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(30,899 |
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Net
assets available for benefits per Form 5500
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$ |
2,608,371 |
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$ |
3,883,456 |
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The
following is a reconciliation of benefits paid to participants per the financial
statements to IRS Form 5500:
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Year
ended
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December
31,
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2009
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Benefits
paid to participants per the financial statements
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$1,243,447
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Add
amounts allocated to withdrawing participants at December
31, 2009
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165
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Less
amounts allocated to withdrawing participants at December
31, 2008
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(30,899)
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Benefits
paid to participants per Form 5500
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$1,212,713
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VSE
Corporation Employee ESOP
Notes
to Financial Statements (continued)
The
Company received a favorable determination letter dated April 29, 2010 on the
termination of the Plan from the IRS. The plan administrator believes
that the Plan and related trust are designed and currently being operated in
accordance with the applicable sections of the Internal Revenue Code
(IRC). Therefore, no provision for income taxes has been included in
the Plan’s financial statements.
Section
407(b) of ERISA permits the Plan to hold an investment in VSE Stock in excess of
10% of the fair market value of the Plan’s assets.
8.
Risk and uncertainties
The
Plan’s assets are invested in Company stock. Investments are exposed to a
concentration of credit risk due to the large amount of funds invested in
Company stock. Due to the level of risk associated with the concentrated
investment, it is at least reasonably possible that changes in risk in the near
term could materially affect the participants’ account balances and the amounts
reported in the financial statements.
VSE Corporation Employee ESOP
Schedule
H, Line 4i—Schedule of Assets (Held At End of Year)
EIN:
54 0649263 Plan Number: 002
December 31,
2009
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Identity of Issue
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Description of Investment
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Cost
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Fair Value
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*
VSE Stock
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Common
Stock shares
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$129,221
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$2,455,733
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Total
assets held for investment purposes
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$2,455,733
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*
Identified as a party-in-interest